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Credit Union Competition

ABA Position

The credit union tax exemption is no longer justified. Credit unions have drifted from their original mission, and have outgrown their special tax-exempt status. Taxpayers can no longer afford to continue subsidizing the credit union industry. The goal is to have these large, aggressive credit unions return to their original mission or become subject to the same regulatory, supervisory and tax requirements as banks.

Congress established credit unions in the 1930s to provide small-dollar loans to close-knit groups of people of modest means. To encourage credit unions in their mission, Congress exempted credit unions from federal income taxes.

However, many of today’s credit unions bear little resemblance to the industry that received this special tax exemption and today have become indistinguishable from the banking industry. Credit unions have leveraged their taxpayer subsidy to aggressively grow—becoming a $1 trillion industry. And as the credit union industry expands, it does so at the expense of all taxpayers.

Congress established credit unions in the 1930s to provide small-dollar loans to close-knit groups of people of modest means. To encourage credit unions in their mission, Congress exempted credit unions from federal income taxes.

However, many of today’s credit unions bear little resemblance to the industry that received this special tax exemption and today have become indistinguishable from the banking industry. Credit unions have leveraged their taxpayer subsidy to aggressively grow—becoming a $1 trillion industry. And as the credit union industry expands, it does so at the expense of all taxpayers.

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